Who Is Entitled to the End-of-Service Award?
Every employee who has completed at least two consecutive years with an employer is entitled to an end-of-service award, regardless of nationality or the business's activity. The one exception is an employee with under two years of service who resigns voluntarily without a statutorily recognized reason — in that specific case alone, no award is owed unless the employment contract states otherwise.
The Basic Calculation, Step by Step
The general calculation rests on two rules: half a month's wage for each of the first five years of service, then a full month's wage for every year after that. An employee who served seven years, for example, is entitled to: (half a month × 5 years) + (a full month × 2 years) = 2.5 + 2 = 4.5 months of their final wage. This full calculation applies when the contract ends at the employer's initiative or expires without renewal.
The Resignation Scale Under Article 85
When the employee is the one ending the relationship, Article 85 of the Labor Law sets a clear scale: one-third of the award if service ran between two and five years, two-thirds if service exceeded five years but stayed under ten, and the full award if service reached ten years or more — regardless of the fact that the employee chose to leave. This scale rewards long-term stability even in resignation scenarios.
Is the Award Based on Basic Salary or Total Compensation?
The award is calculated on the employee's final wage, which includes the basic salary plus any fixed, regularly paid allowances such as housing or transportation allowances, but typically excludes variable bonuses, irregular commissions, or overtime pay. Understanding this distinction matters, since many disputes arise over whether a specific allowance should be included in the calculation base.
A Special Exception for Marriage or Childbirth
The law grants female employees a special exception: if she ends her employment contract within six months of her marriage, or within three months of giving birth, she is entitled to the full end-of-service award regardless of her actual years of service — an explicit exception to the standard resignation scale, though it requires proving the contract's termination is genuinely tied to the marriage or birth.
Deducting Debts and Advances From the Award
The employer may deduct any amounts owed by the employee from the award, such as cash advances, internal loans, or unreturned company property, provided these amounts are documented and clear. This deduction doesn't eliminate the employee's right to claim the difference if the deduction exceeds what's actually owed, and we help clients verify these calculations' accuracy before signing any final clearance.
What If the Employer Refuses to Pay?
When an employer refuses or unjustifiably delays paying the owed award, the employee has the right to file a complaint through the electronic labor office platform — a mandatory first step before judicial escalation. If amicable settlement fails within the defined statutory period, we help you move to litigation before the competent labor court, where we help you establish your years of service and actual wage with the necessary documents. And if your contract's termination itself was unjustified, see our guide on unfair dismissal and how to prove it to assess your right to additional compensation.
A Complete Worked Example
Suppose an employee resigns after eight years of service, with a final basic salary of SAR 8,000. The full award is calculated as: (half a month × 5 years) + (a full month × 3 years) = 2.5 + 3 = 5.5 months × SAR 8,000 = SAR 44,000 as the full award. But since termination was by resignation after service exceeding five years but under ten, only two-thirds of this amount is owed — approximately SAR 29,333.
End-of-Service Award vs. Social Insurance (GOSI)
Many employees confuse the end-of-service award with retirement entitlements from Social Insurance (GOSI), but these are two entirely separate systems. The end-of-service award is a direct obligation on the employer, paid from the business's own budget when the contract ends, while GOSI entitlements accumulate from monthly contributions paid jointly by employer and employee throughout the years of service, paid out entirely separately upon retirement, disability, or death. An employee is entitled to both, without one being deducted from the other.
Is the Award Subject to Tax?
The end-of-service award isn't subject to personal income tax, since Saudi Arabia doesn't impose income tax on individual salaries or awards, whether for Saudis or residents. This differs from the business's own obligations regarding Zakat or corporate tax, which have no bearing on the amount an employee actually receives.
The Award Upon an Employee's Death
If an employee passes away during their service, the full end-of-service award is paid without any reduction tied to the reason for termination, and is added to their estate for distribution to legal heirs under inheritance and estate rules, alongside any other insurance entitlements their family may be owed from Social Insurance.
How We Help With This File
We review your contract, salary records, and the actual circumstances of your termination, usually within one business day, giving you a precise calculation of your entitlements before any step — whether negotiating with your employer amicably or preparing to file a formal complaint. Reach out on WhatsApp to review your case.
Frequently Asked Questions
Is the award calculated on the last salary or an average of salaries?
It's calculated based on the employee's last basic wage plus regular fixed allowances, not on an average of past salaries or variable bonuses.
Does an employee get the full award in cases of unfair dismissal?
Yes, in unfair dismissal cases the employee is entitled to the full award regardless of years of service, in addition to entirely separate compensation for the unfair dismissal itself.
Does the award lapse if I resign before completing two years?
Yes, as a general rule, unless your employment contract states otherwise, or your resignation is tied to a statutorily recognized excuse such as a work injury or force majeure.
Can an employer delay paying the award for several months?
No, all entitlements must be paid within two weeks of the employment relationship's end, and the employee has the right to formally claim if the delay exceeds this period.